The Taylor Corporation is using a machine that originally cost $66,000.The machine has a book value of $66,000 and a current market value of $40,000.The asset is in the Class 8 CCA pool.It will have no salvage value after 5 years and the company tax rate is 40%.
Jacqueline Elliott,the Chief Financial Officer of Taylor,is considering replacing this machine with a newer model costing $70,000.The new machine will cut operating costs by $10,000 each year for the next five years.Taylor's cost of capital is 8%.
Should the firm replace the asset? (Use NPV methodology to solve this problem.)

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The Answer of The Taylor Corporation is using a machine that originally cost $66,000.The machine has a book value of $66,000 and a current market value of $40,000.The asset is in the Class 8 CCA pool.It will have no salvage value after 5 years and the company tax rate is 40%.
Jacqueline Elliott,the Chief Financial Officer of Taylor,is considering replacing this machine with a newer model costing $70,000.The new machine will cut operating costs by $10,000 each year for the next five years.Taylor's cost of capital is 8%.
Should the firm replace the asset? (Use NPV methodology to solve this problem.)

The Taylor Corporation Is Using a Machine That Originally Cost